New Tools to Fight Fraud, Strengthen Medicare and Protect Taxpayer Dollars

The Affordable Care Act takes landmark steps forward to fight health care fraud, waste, and abuse by providing critical new tools to improve and enhance the Administration’s ongoing efforts to prevent and detect fraud, and crack down on individuals who attempt to defraud Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) as well as private insurance. CMS has taken significant strides using innovative technology to put the Affordable Care Act’s antifraud provisions into effect. In addition, the President has committed to cutting the improper payment rate in the Medicare Fee for Service program in half by 2012. Below we highlight some of the accomplishments the new tools have produced in preventing and fighting fraud, waste, and abuse in these programs.

Summary of Fraud Prevention Accomplishments under the Affordable Care Act

Tough New Rules and Sentences for Criminals: The Affordable Care Act increases the federal sentencing guidelines for health care fraud offenses by 20-50% for crimes that involve more than $1 million in losses. The law establishes penalties for obstructing a fraud investigation and makes it easier for the government to recapture any funds acquired through fraudulent practices. And the law makes it easier for the Department of Justice (DOJ) to investigate potential fraud or wrongdoing at facilities like nursing homes. Convictions under the Health Care Fraud and Abuse Control Program increased by 25% (583 to 726) between 2009 and 2010, and continued to grow in 2011.

Enhanced Screening and Other Enrollment Requirements: On January 24, 2011, the Centers for Medicare and Medicaid Services (CMS) announced rules to enforce some of the Affordable Care Act’s most powerful new fraud prevention tools. New enrollment requirements for all Medicare, Medicaid, and CHIP providers and suppliers took effect on March 25, 2011, and require categories of providers and suppliers who have historically posed a higher risk of fraud or abuse to be undergo a higher level of scrutiny than others before enrolling or re-enrolling in the Medicare or Medicaid programs or CHIP.

To support the Affordable Care Act’s new regulatory requirements for risk-based provider enrollment in a highly efficient and sophisticated way, CMS implemented a new Automated Provider Screening (APS) system in December 2011. The APS uses existing information from public and private sources to automatically verify information submitted on a provider’s Medicare enrollment application. The new tool also monitors all providers and suppliers, on an ongoing basis, to ensure they continue to meet Medicare enrollment requirements, such as licensure. The new system is replacing the time- and resource-intensive process of manual review of the enrollment application that Medicare had relied on, simultaneously making it easier and quicker for legitimate providers to enroll while putting new barriers in the way of would-be fraudsters.

Increased Coordination of Fraud Prevention Efforts: Many of the Affordable Care Act antifraud provisions increase coordination among states, CMS, and its law enforcement partners at OIG and DOJ. The new rules authorize CMS, in consultation with the Office of Inspector General (OIG), to suspend Medicare payments to providers or suppliers during the investigation of a credible allegation of fraud. These initiatives have moved Medicare significantly beyond a “pay and chase” mode of having to track down fraudulent payments after the fact. From implementation on March 25, 2011 to the end of Fiscal Year 2011, the investigations conducted during the payment suspensions imposed under this new authority have led to over $160 million in overpayment determinations. States must also withhold payments to Medicaid providers where there is a credible allegation of fraud. The law also ensures that fraudulent providers and suppliers cannot move easily from state to state or between Medicare and Medicaid by requiring all states to terminate anyone whose billing privileges have been revoked by Medicare or who has been terminated for cause.

Sharing Data to Fight Fraud: Building on the Obama Administration initiatives to improve coordination across the agencies charged with stopping fraud, the law requires certain claims data from Medicare, Medicaid and CHIP, the Veterans Administration, the Department of Defense, the Social Security Disability Insurance program, and the Indian Health Service to be centralized, making it easier for agency and law enforcement officials to identify criminals and prevent fraud on a system-wide basis. The Obama Administration has already improved access to data for law enforcement, and DOJ and OIG continue to benefit from improved access to data to help identify criminals and fight fraud. CMS is also helping to provide OIG and DOJ improved near real-time data access to enable investigators and law enforcement agents to more quickly detect and prosecute fraud schemes.

New Tools to Target High Risk Entities: In addition to the enhanced enrollment and screening requirements, the new rules also allow the Secretary to impose a temporary moratorium on newly enrolling providers or suppliers of a particular type or in certain geographic areas if necessary to prevent or combat fraud, waste, and abuse. CMS issued rules on May 5, 2010 implementing the Affordable Care Act requirement that providers and suppliers who order and refer certain items or services for Medicare beneficiaries be enrolled in Medicare and maintain documentation on those orders and referrals.

To target resources to highly suspect behaviors, CMS has implemented the new Fraud Prevention System, which uses advanced predictive modeling technology to fight fraud. The system has been screening all Medicare fee-for-service claims before payment is made since June 30, 2011. Much like the predictive technologies used in the credit card industry, the Fraud Prevention System uses advanced technology to identify suspicious behavior. This focuses investigative resources on areas of vulnerability that demand immediate attention and response. By streaming claims on a prepayment basis, CMS and its investigative partners are able to stop payment of fraudulent claims and respond quickly to emerging trends.

New Focus on Compliance and Prevention: Under the new law, some preventive measures focus on certain categories of providers and suppliers that historically have presented concerns, including Home Health agencies, Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers, and Community Mental Health Centers (CMHCs). For example, the Affordable Care Act also modifies existing surety bond requirements to allow the Secretary to require certain provider and suppliers to post a surety bond that is commensurate with the volume of billing of a provider or supplier.

Additionally, on November 17, 2010, CMS finalized a rule implementing the new Affordable Care Act requirement for patients to receive a “face-to-face” visit with an appropriate health care professional when receiving Medicare home health and hospice services. On July 12, 2011, CMS proposed “face-to-face” encounter requirements for Medicaid home health including medical supplies, equipment and appliances. Additional face-to-face requirements for Medicare DME suppliers will be issued later this year. In addition, CMS proposed rules on June 17, 2011 to implement the requirement that CMHCs provide at least 40% of their items and services to non-Medicare beneficiaries in order to prevent the standing up of CMHCs solely for the purpose of fraudulently billing Medicare.

Expanded Overpayment Recovery Efforts: The Affordable Care Act expands the Recovery Audit Contractor (RAC) program to Medicaid, Medicare Advantage, and Medicare Part D programs. On December 27, 2010, CMS published in the Federal Register a national solicitation for comments on innovative approaches to RAC programs within Medicare Advantage and Part D. In January 2011, CMS entered into a RAC contract to identify improper payments in the Part D program.

On September 16, 2011, the CMS published a final rule in the Federal Register implementing the Medicaid RAC program. The effective date of the final rule is January 1, 2012. HHS projects the program will save $2.1 billion over the next five years, of which $900 million will be returned to states. The new program is based on the successful Medicare Recovery Audit Contractor program, which recovered $797 million in Fiscal Year 2011.

New Durable Medical Equipment (DME) Requirements: CMS has implemented new requirements for DME suppliers, an area of particular concern when it comes to fraud. Under the Affordable Care Act, CMS expanded the DME Competitive Bidding program to new areas of the country. On August 27, 2010, CMS issued final rules enhancing Medicare enrollment standards for DME suppliers such as more stringent operations and facilities requirements to ensure only legitimate suppliers can participate in Medicare. The program is estimated to save Medicare, seniors and taxpayers more than $28 billion over ten years. Already in 2011, the first phase of the program has saved Medicare 35% compared to the fee schedule and resulted in lower cost for Medicare patients. The second phase of the program expands it to 91 metropolitan areas.

New Resources to Fight Fraud: The Affordable Care Act provides an additional $350 million over 10 years to ramp up anti-fraud efforts, including increasing scrutiny of claims before they’ve been paid, investments in sophisticated data analytics, and more “feet on the street” law enforcement agents and others to fight fraud in the health care system.

Greater Oversight of Private Insurance Abuses: The law also provides enhanced tools and authorities to address abuses of multiple employer welfare arrangements and protect employers and employees from insurance scams. It also gives new powers to the Secretary and Inspector General to investigate and audit the health insurance exchanges. This, plus the new rules to ensure accountability in the insurance industry, will protect consumers and increase the affordability of health care.

Learn more about ongoing efforts to prevent fraud at StopMedicareFraud.gov.

Learn how to report suspected Medicare fraud and medical identity theft.

Posted: March 15, 2011

Last updated: January 18, 2012